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Insurers paid $447 million in medical loss ratio rebates for 2016

Health insurers paid nearly $447 million in customer rebates for 2016 under a federal rule requiring payers to spend a minimum percentage of their premium dollars on medical care and quality improvement, the CMS said last week.

Those rebates issued under the medical loss ratio provision of the Affordable Care Act went to 3.9 million consumers enrolled in individual and employer-based health insurance coverage for 2016.

Rebates for 2016 were up compared to the $397 million issued to consumers for 2015. Since 2011, insurance companies have paid out $3.2 billion in rebates under the medical-loss-ratio requirement.

The MLR requirement is intended to curb excessive health insurer profits and administrative costs, such as salaries and marketing. It requires insurers in the individual and small group insurance markets to spend at least 80% of their premiums on medical care or quality improvement activities. Insurers in the large group market must record a MLR of 85%.



The vast majority of insurance companies report loss ratios well above the threshold each year. For 2016, the average MLR was 92.9% in the individual market, 86.1% in the small group market, and 90.3% in the large group market, the CMS reported.

Those that don't meet the MLR thresholds must refund the difference to their customers.

Employers received about $153 million in rebates in the small group market and $191 million in rebates in the large group market for 2016. Consumers received about $103 million in rebates in the individual market. The average rebate per person was $114 in the individual market, $109 in the small group market, and $116 in the large group market, the CMS said.

In October, the federal government proposed a rule that would allow states to lower the MLR requirements, as a way to give states more flexibility to improve the affordability of healthcare coverage.

But the CMS expects few states to take advantage of the proposal. It estimates only 22 states will seek to push MLRs below the current 80% threshold.


Shelby Livingston

Shelby Livingston is an insurance reporter. Before joining Project Japan in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.


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